Advisory Opinion No. 2001-48

Re: Ken Schadegg


Legal Counsel for the Providence Neighborhood Housing Corporation (PNHC) requests an advisory opinion on behalf of the petitioner, a PNHC employee, a municipal employee position, as to whether he may participate in the City of Providence’s Employee Advantage Homebuyer Program, given that he meets loan eligibility criteria, but is involved in the PNHC’s administration of the Program.


It is the opinion of the Rhode Island Ethics Commission that the petitioner, a Providence Neighborhood Housing Corporation (PNHC) employee, a municipal employee position, may participate in the City of Providence’s Employee Advantage Homebuyer Program where he otherwise meets loan eligibility criteria, provided that he 1) did not participate in establishing Program eligibility criteria; and 2) recuses from participation in all PNHC matters involving his application and loan.

In February 2001, the City of Providence launched the Employee Advantage Homebuyer Program for the purpose of providing incentives for municipal employees to purchase homes and reside in targeted neighborhoods throughout the City. The Program offers approximately 5,000 permanent City employees a forgivable loan of between $5,000 and $15,000 at 0% interest. The loan may be used for a down payment, closing costs or mortgage interest rate reduction in connection with the purchase of a primary residence within the City. In conjunction with the Department of Planning and Development, the Providence Neighborhood Housing Corporation (PNHC) administers all Program funds. The petitioner advises that he is one of five PNHC staff members who participates in the review of loan applications. He represents that the review process primarily consists of confirming that the applicant is a permanent municipal employee, verifying that the property to be purchased is located within the City of Providence and that the applicant does not have an existing mortgage on any other residential property at the time of closing on the Program loan. The petitioner informs that approximately $500,000 has been budgeted for the program, and additional funding may be available based upon the volume of applications received. On January 30, 2001, the Mayor of Providence held a press conference announcing the Program. Copies of a press release describing the program were distributed to all City employees by attachment to their February 1, 2001 paychecks. The program further has been publicized in the Providence Journal.

The petitioner has been a member of the PNHC staff since May 1998 and presently resides within the City. He was actively involved in the development of the Program, along with the PNHC’s Executive Director, Board of Directors, a City Councilor and Department of Planning and Development officials. He wishes to purchase a primary residence at 439 Park Avenue, Providence. After closing on that property, he would have no other mortgages on any other residential properties and therefore, presumably would meet Program eligibility criteria. In February 1999, the PNHC adopted its own set of conflict of interest provisions for the participation of PNHC and Department of Planning and Development staff in PNHC programs. The petitioner informs that the PNHC’s conflict of interest provisions would not bar his participation in the Program, provided that, inter alia, he withdraws from the decision making process regarding who receives a direct benefit from the Program. He further advises that he would recuse himself from participation and vote in the Loan Review Committee’s consideration of his application.

Under the Code of Ethics, the petitioner may not have any interest, financial or otherwise, direct or indirect, which is in substantial conflict with the proper discharge of his duties in the public interest. See R.I. Gen. Laws § 36-14-5(a). A substantial conflict of interest occurs if he has reason to believe or expect that he or any family member or business associate, or any business by which he is employed or represents will derive a direct monetary gain or suffer a direct monetary loss by reason of his official activity. See R.I. Gen. Laws § 36-14-7(a). He also is prohibited from using his public position or confidential information received through his position to obtain financial gain, other than that provided by law, for himself, a family member, business associate, or any business by which he is employed or represents. See R.I. Gen. Laws § 36-14-5(d). Further, no person subject to the Code or any person within his or her family may enter into a contract with any state or municipal agency unless “the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded.” See R.I. Gen. Laws § 36-14-5(h).

The Commission consistently has concluded that public officials and employees may not bid on contracts where they have participated in the bid development process. Under the Code, participation in the bid specification process places the public official or employee in a privileged and/or advantageous position with respect to other bidders. See A.O. 98-65 (finding that Town employees who provided substantive input into a decision to put property to tax sale, or as to requirements of the bids, may not bid on the property).

Additionally, the Commission and the Supreme Court has generally concluded that where a public official’s or employee’s participation in a matter ultimately results in an outcome that will affect him/her, family, business associates, or employers, that the public offcial or employee is required to recuse or not reap the benefit of their prior action. For instance, the Supreme Court in Celona v. Rhode Island Ethics Commission, 544 A.2d 582, 586 (R.I. 1988), held that the members of the North Providence Town Council violated the Code of Ethics when they enacted a preliminary resolution granting themselves $100 in monthly expense money. Although the resolution required final approval by the General Assembly, the Court found that the Council members had reason to believe or expect that the passage of a resolution would result in a personal financial benefit since, but for, their participation, the General Assembly would not have had the opportunity to consider the amendment to the Town Charter. See also A.O. 99-35 (advising Governor’s Justice Commission VAWA Planning Committee’s members that they should recuse where their organizations may be recipient of program grant funds since, although the VAWA Planning Committee is not the ultimate decision maker as to sub-grant awards, it is an essential step in the process that narrows and directs where funding will be allocated); A.O. 97-51 (advising a legislator serving as a member of the Rhode Island House of Representatives that he may not introduce legislation adding public library funding to fulfill a state imposed mandate given he is employed by a public library); A.O. 98-86 (concluding that Town Councilor could participate in School Department open and public bidding process for a lease provided that if he has not participated in or otherwise influenced the bid development process such as affecting the funding available to the School Department for any such leasing arrangement).

In an analogous context, the Commission previously concluded that a West Warwick Town Councilor could participate in a CDBG Business Assistance Loan program administered by the Town, provided that any loan funds awarded to him would not be allocated from the 1999 grant funds upon which he had voted. See e.g., A.O. 2000-28.

There, the Council established the eligibility criteria prior to the Councilor’s election to office. The Commission concludes that the petitioner may participate in the City of Providence’s Employee Advantage Homebuyer Program, provided that he did not participate in establishing the eligibility criteria for applicants. The Code of Ethics requires his recusal from participation and/or vote on the PNHC Loan Review Committee’s consideration of his application. In the event that the petitioner’s application for funding is approved, he must recuse himself prospectively from all matters relating to his loan. Further, the petitioner's submission of an application for loan funds through his employer, the PNHC, is a ministerial act. As such, it is not an appearance before the governmental entity by which he is employed, which would be prohibited by R.I. Gen. Laws § 36-14-5(e). See A.O. 98-22 (finding that a Providence Plan Housing Corporation employee may submit an application for HOME funds to the PPHC, given that it is a ministerial act and she does not possess discretionary authority regarding the HOME funding program in her employment with PPHC, nor is she in any way involved with the application or approval process for the HOME program). Notice of recusal should be filed with both the PNHC and the Ethics Commission pursuant to R.I. Gen. Laws § 36-14-6

Code Citations:






Related Advisory Opinions:






















Related Case Law:

Celona v. Rhode Island Ethics Commission, 544 A.2d 582, 586 (R.I. 1988)


Financial interest

Government loans